Net and Absolute Leases Explained: Who Really Pays for What?

Net and absolute leases are common structures in commercial leasing, particularly for single-tenant retail properties, industrial buildings, and long-term investment-grade tenants. These lease types differ from gross leases by shifting more financial responsibility from the landlord to the tenant.

In a typical net or absolute lease, tenants may be responsible not only for base rent, but also for expenses such as property taxes, insurance, and maintenance—sometimes even structural repairs and replacements. This structure allows landlords to reduce their involvement in day-to-day property operations, while tenants assume a greater share of ongoing costs.

However, net and absolute leases come in several forms, each assigning obligations differently. Understanding these distinctions is essential for evaluating long-term costs, risk exposure, and negotiation strategy. The sections below outline the key types of net and absolute leases and how they function in practice.

1. Net Lease

A net lease is a type of commercial property lease. In this agreement, the base rent paid by the tenant is lower than that of a full-service lease, but the tenant also pays other expenses. These expenses can include common area maintenance items (CAMS), insurance, and property taxes.

In this type of agreement, to calculate tenant’s pro-rata share of operating expenses, landlord takes the total operating cost per square foot for all rented space then divide it among tenants based on the percentage of the building used by each tenant.

There are three different types of net leases.  The landlord passes a different level of financial obligation onto the tenant in each type of net lease.

Triple-Net Lease (or NNN lease)— A triple net lease is basically the opposite of a gross lease. The tenant pays rent, utilities, in addition to a proportionate share of CAMS, real estate taxes, and property insurance. CAMS generally include janitorial services, property management fees, sewer, water, trash collection, landscaping, parking lots, and any other commonly shared area or service. The landlord pays are a base amount of building maintenance and repairs. NNN leases are often longer-term. This type of agreement can cause issues for tenants when maintenance fees are far higher than expected.

• Tenants pay rent and utilities and their pro-rata share of all the building’s operating expenses, including maintenance fees, building insurance, and property taxes.

• Landlord pays base building maintenance and repairs.

• This commercial lease type is quite common.

Double-Net Lease (or NN lease)— The tenant pays rent, utilities, property taxes, and the cost of building insurance. The landlord is only responsible for maintenance costs. Like other net leases, base rent is generally lower since the tenant is responsible for additional expenses.

• Tenant pays rent and utilities plus property taxes and building insurance.

• Landlord only pays maintenance costs.

• This is another most popular commercial lease type.

Single-Net Lease (or N lease)— The tenant pays base rent, utilities, and the property tax. The landlord pays the building insurance and maintenance fees.

• Tenant pays rent, utilities, and property taxes.

• Landlord pays building insurance and maintenance.

 2. Absolute NNN Lease/Bondable Lease

• Tenants pays all building expenses.

• Landlord does not have any responsibility for building costs.

• These leases are the least common type.

An absolute triple-net lease (also known as a bondable lease) is the exact opposite of a gross lease, and it is more binding than a standard triple-net lease.

The terms absolute NNN lease and triple net lease are sometimes used interchangeably, but they are not the same. In a triple net lease, the tenant usually pays a for some or all building’s maintenance and repair expenses, but sometimes the landlord pays some part of those expenses.

However, In An absolute triple-net lease, the tenant is responsible for all expenses associated with the property including any structure or roof repairs. The tenant takes all responsibility for all the costs no matter what happens, even in the event that the building was to be destroyed due to a natural disaster.  In this case, the tenant would, on the one hand, pay the costs for the reconstruction of the building, and on the other hand, would continue to pay the rent.

Although the base rent for this lease is much lower than other types of leases, this is the rarest commercial lease type. Most tenants do not want to take on this level of risk.